engleski

Distributional Effects of VAT: The Case of Croatian Family Tax Burden

The paper stars with the presentation of the importance of VAT in Croatia, comparing it with that of the EU and transition economies. The higher importance of VAT in transitional economies, especially Croatia, stresses highly its distributional consequences. The characteristics of VAT relevant for the distributional effects - especially rate structure (as well as exemptions) of Croatia and transition economies are analyzed too. They support the expectations of higher regressivity of Croatian VAT in comparison with the other transition economies as well as EU. The empirical research on the case of two-earner families in the one Croatian county - the County of Primorsko goranska confirms this regressivity. Furthermore, four simulations of the reduced rate (5%) introduction (with different assumptions regarding resulting tax saving) also confirm that the reduced rate could be used to mitigate and even neutralize the regressivity, leading to a proportional impact of VAT, but that the considerable progressive effect could not be achieved. At the end, the possible positive influence of the introduction of the reduced VAT rate on the personal consumption structure is presented.

VAT; CEE; Croatia; consumption

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